How to Manage Your Stock Portfolio

Do you regularly review your portfolio holdings? I view my stock holdings as actual stakes in businesses (because they are). Thus, every serious investor should practice disciplined portfolio management. Why? Businesses aren’t forever. Business go through cycles. And businesses can be hit by serious issues. Take TD for example. TD has recently come under scrutiny for allegations of its sales practices. DBRS explained:

These reports include allegations, by both current and former employees of TD, of aggressive sales practices, creating potentially unethical and illegal activity in TD’s Canadian retail bank. The allegations of misconduct, while not currently at the same level, are reminiscent of what transpired at Wells Fargo & Company last year that came to public attention following settlement agreements reached with the Consumer Financial Protection Bureau, as well as other parties. Following the settlement, Wells Fargo & Company has been subject to negative media coverage, increased U.S. government scrutiny, litigation, as well as senior management changes.

I’m not saying to dump your TD shares if you own any. I don’t give recommendations. However, what I want to stress is that all investors should be well aware of what’s going on with the companies in their portfolio. I’ll explain how I go about portfolio management (it’s my shortcut). Every now and again I’ll go back toPhilip Fisher’s15 Points to Look for in a Common Stock, which was a short, but very important chapter in his book,Common Stocks and Uncommon Profits…

…Anyway, I’ll scan my stock holdings, validating them against Fisher’s 15 points (see below), and then decide whether to hold, dump, or buy more shares in the companies that I own. In my opinion, Philip Fisher’s “points” will save you money. His advice might sound ‘common sense’, but let’s face it, common sense isn’t common, or at least, some investors allow greed and fear to cloud their judgement from time to time. Imagine if you had used these 15 points to evaluate RIM/BlackBerry before its fall from grace (see point #14). Or Valeant before its implosion (see point #15). Or any other dog stock that might still be sitting in your portfolio – seeallpoints. (I’ve been a victim of holding declining stocks too). Alas, here are the 15 points you can use to review your stock portfolio on a regular basis.

Philip Fisher’s 15 Points to Look for in a Common Stock:

1) Does the company have products or services with sufficient market potential to make possible a sizeable increase in sales for at least several years?

2) Does the management have a determination to continue to develop products or processes that will still further increase total sales potential when the growth potential of currently attractive product lines have largely been exploited?

3) How effective are the company’s research and development efforts in relation to its size?

4) Does the company have an above-average sales organization?

5) Does the company have a worthwhile profit margin?

6) What is the company doing to maintain or improve profit margins?

7) Does the company have outstanding labor and personnel relations?

8) Does the company have outstanding executive relations?

9) Does the company have depth to its management?

10) How good are the company’s cost analysis and accounting controls?

11) Are there other aspects of the business somewhat peculiar to the industry involved that will give the investor important clues as to how the company will be in relation to its competition?

12) Does the company have a short-range or long-range outlook in regard to profits?

13) In the foreseeable future, will the growth of the company require sufficient financing so that the large number of shares then outstanding will largely cancel existing shareholders’ benefit from this anticipated growth?

14) Does the management talk freely to investors about its affairs when things are going well and “clam up” when troubles or disappointments occur?

15) Does the company have a management of unquestioned integrity?

Robin Spezialeis the national bestselling author of Market Masters, which is available at Chapters, Indigo, and Coles as well as Costco and Amazon.ca. He lives in Toronto, Ontario. Learn more about Market Masters.

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About Robin Speziale

Robin R. Speziale, a graduate of the University of Waterloo, is the National Bestselling Author of Market Masters, which features exclusive conversations with Canada’s top investors, as well as Lessons From the Successful Investor, which contains 85 important investment lessons that he learned throughout his own trials, tribulations, and winnings in the market. Robin has been saving, investing, and building his portfolio since the age of 18. Now, at 30, he’s amassed a $300,000+ stock portfolio. He lives in Toronto, Ontario.

Disclaimer: Robin Speziale is not a registered advisor. The content on this website, including blog posts, pages, and newsletter, does not contain any financial advice or stock recommendations. Please conduct your own research and consult a professional. Investing involves risk.